M&A in agribusiness and food & beverage sector remains resilient

07 May 2023 Consultancy.com.au 3 min. read

Despite economic uncertainty, the impacts of severe weather events, and global supply chain issues, the number of deals in Australia’s agribusiness and food & beverage landscape has remained stable over the past 18 months. This is according to research by Grant Thornton.

The analysis by the M&A wing of the accounting and consulting firm looked at all deal activity between mid-2021 and the end of 2022, finding that 1,466 deals closed worldwide during this period, which is around 10% below the long-term global average of 1,629 transactions.

With 67 deals, closed by both strategics and financials, Australia was the world’s fifth busiest dealmaking scene, behind the US, UK, France, and Canada, according to Grant Thornton’s estimates. However, Australia’s landscape was notably more resilient to the drops in M&A activity mostly seen elsewhere.

Global M&A deals - half year (HY) trends

In Australia, small to mid-sized businesses accounted for 79% of deals (less than $100 million), consistent with the historical average. 42% of Australian deals were between the $20 million to $100 million range, an increase from the historical average of 27%, indicating an increase in median deal size and in mid-market deal activity.

Close to 73% of Australian agribusiness and food & beverage companies were acquired by domestic buyers, albeit with a number of these domestic buyers having majority foreign ownership. The Asia Pacific region remains Australia’s biggest foreign investor, with the US and Canada the next largest.

Overseas investor interest in the sector was demonstrated by the acquisitions of Tassal ($1.65 billion), Huon Aquaculture ($721 million) and Australian Lamb Company ($400 million) by Canadian seafood producer Cooke and Brazilian protein giants JBS and Minerva Foods respectively.

Australian deals by transaction value

Packaged foods and meats remains the dominant segment nationally, making up approximately 61% of Australian transactions in the 18-month period studied, a 9% increase on the historical average.

Within the segment, seafood producers and processors were the main contributors in terms of deal value. The sales of Tassal Group and Huon Aquaculture were the largest transactions, followed by the sales of Western Australia-based fishing businesses MG Kailis Holdings ($70 million) and MaxFoods ($57 million).

The seafood and aquaculture industry accounted for three of the top ten Australian deals, “highlighting the pivotal role the segment is expected to play in worldwide food volumes and security in the years ahead,” said Cameron Bacon, a partner at Grant Thornton.

Australian deals by sub-sector (18 Month Periods)

Despite facing several challenges, including the Chinese trade bans, the distiller and vintner segment has maintained its position in the agribusiness and food & beverage industry – representing around 20% of Australian transactions.

The brewery sector however faced headwinds. Only three deals closed during the 18-month period: the sale of Fermentum to beer giant Lion for more than $500 million in 2021, and the smaller sales of Mismarch Brewing to Mighty Craft in 2021, and Little Bang Brewing to Duxton Pubs Group in 2022.

Across the board, Bacon said that “Australian businesses in the agribusiness and food & beverage industry remain an attractive investment opportunity for domestic and foreign buyers,” said Bacon.

Globally, the $7.1 billion acquisition of BA Sports Nutrition by The Coca-Cola Company went down in the books as the largest deal during the 18-month study period, with the purchase of Dutch tea and herbal brand Ekaterra by an investor hot on its heels.